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"Lost In Construction" - Relative Difference Between Housing Starts And Completions Hits Record
While one can discuss seasonal factors, such as abnormally warm weather, as a driver of today's beat in Housing Starts, a far less noted number for headline purposes is the other side of the equation - Housing Completions. Because after all, every house that is started has to be completed at some point. One look at the chart below, shows why completions is quietly ignored, as it presents a far less optimistic picture about the housing market. Indeed, printing at 530k seasonally adjusted annualized units, the completions number was just the second lowest in decades, better only than the 509K from January 2011. And where this becomes rather glaring is when looking at the relative, or percentage, spread between Starts and Completions: at 31.9%, this was the highest in, well, as far as our data series goes back to. Does this mean that homebuilders are merely "breaking ground" for book keeping purposes, just to "paint the tape" and then quietly fading away into the night? We will know for sure in February when we get at least one more data print to validate or deny the recent troubling trend, but for the time being, to paraphrase a famous Bill Murray movie, is there something here being "lost in construction?" Or, far more simply, is this merely the latest ploy to paint not the tape so much as the economy in an election year with the latest incarnation of "cash for clunking construction"?
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soviets used to love to get intelligence information this way..
they preferred 2 independent sources, so if something is wrong , one of them is a rat aka double agent. it was quite effective
alx
It's an interesting stat, but it's easy to read to much into this data because:
1) Housing starts and completions data in general are of limited value given the extremely thin sample size of permits and large margins of error
2) Looking at the delta between seasonally adjusted annualized rates of these two data series is a bit of a stretch because they are not actual numbers to begin with (welcome again to X-12-ARIMA hell)
3) There are various data lag since it takes a few months to build a home from start to completion, especially given that much of the construction activity now is multi-family rental (much of which gets lumped in with single family stats if it's not stacked vertically)
But suffice to say, both are at very low levels in an historical sense.
Agreed on all points. I think there's a simple argument to be made that after an unprecedented contraction in housing starts, you will have to see an unprecedented gap versus completions after the market absorbs a portion of the slack, especially when you look at it on a percentage basis. Switch to absolute figures and its just noise.
So many lies and bullshit stats.
When does it all end?
How can it end?
107 months of inventory...
107: How many months it would take to sell banks’ current and shadow inventory of foreclosed homes.
Banks’ vast pile of foreclosed homes doesn’t appear to be diminishing. That’s a troubling sign for the future of the housing market.
Back in April, this column tallied up all the foreclosed homes sitting in banks’ inventory, as well as the “shadow” inventory of homes in the foreclosure process or on which owners had missed at least two mortgage payments. At the time, we reported that at the current rate of sales, it would take 103 months to unload it all.
Over the past six months, that number has actually risen. Banks managed to pare down the shadow inventory, but largely by taking possession of foreclosed homes. As of September, they owned nearly 994,000 foreclosed homes, up 21% from a year earlier. The shadow inventory stood at 5.2 million homes, down 7% from a year earlier. Grand total: 107 months of inventory.
http://blogs.wsj.com/economics/2010/10/3...
I'm not sure the gap between completions and starts means all that much.
The important fact is that housing starts is still in depressionary levels.
Very Interesting video. Gerald Celente on 2012 top trends.
http://djia.tv/russia-today/battlefield-usa-2012-gerald-celente-on-years...
Incredilbe! Hoising starts still stuck in the penalty box. And are the IJCs for real? Employment to population hasn't budged.
http://confoundedinterest.wordpress.com/2012/02/16/housing-starts-initial-jobless-claims-and-foreclosures/
Hasn't stopped Home Depot and Lennar from doubling the last 6 months.
Anyone who bought the bad news at the lows made 3 - 4 years worth of gains in less than half a year.
Let's thank the government for buying up so much stocks and bonds across the board,
keeping the prices high in a contrary market. Of course, the downside that necessities
like food are doubling in price doesn't affect the upper classes very much, so really,
it's a win win win situation for everybody that counts.
Interesting that you bring up home depot as they essentially are a clearing house for odd-lot home building materials and parts (I include appliances for the sake of discussion). When home building was in full swing the bowl rocked furiously and so much building supply spilled, which home depot happily captured in its inventory. I wonder how stuffed the gills their inventory hubs became. Since you are a touter perhaps you can enlighten. Sorry for calling you an asshole yesterday. Oh wait, I'm not.
I love how HD has dozens of employees standing around asking "can I help you find anything?" When you do need help, all you get are blank looks from some apartment-dweller who hasn't turned a screwdriver in their life.
Use HD plumbing and electrical products at you own risk. Cheapest Chinese crap you can find.
The only place worse than HD is Harbor Freight.
This heatgun was a pretty good deal when I got it on sale for $19.99
People are maxing out their credit cards and then defaulting on the unsecured credit card bill.
The "stuff" they furnished their house with becomes part of the "homestead" and cannot be taken away ...perhaps.
I thought players only hit wiffle balls when they practised their golf swing.
If foreclosures have been, keep, and continue to flood the market how is new housing going to help work through excess inventory?
Good Morning Bitchez!
Of-course CNBC will not care for little things like data, all they will say is buy buy buy, the market is great and the economy is roaring back. Scumbags!!!
Why anybody would build a house when you can buy one dirt cheap(relative to where we've been) is beyond me.
Debt encumbered house owners/banks refuse to listen to reason and sell the houses at a realistic value. Sometimes it is cheaper to get competitive bids from desperate builders & contractors that take a loss on the job just to work.
A strong demand for apartments should give the appearance of a healthy construction economy for a few years until those negative margins take out all the participants. The quality of any new construction is likely to be piss poor which should help future GDP as they are replaced or repaired sooner than anticipated.
I've seen a lot of nice houses sitting on the market around here where the prices have been cut in half from their highs and there are still people building. I just don't get it.
My brother-in-law is still building customs. What is happening with him is, say a couple has been preparing for years to build their retirement home, and they planned to build it exactly to their specs, and so they go through with it, despite the fact that they could buy something similar, an existing home, for much less. It is not an economic decision...it is an emotional decision (like most large purchases).
1932 Duesenberg comes to mind.
History rhyming again.
Unlike houses, that Doozy is probably worth over a cool $1Million these days...
Existing home prices have further to fall as banks are asking for the difference in sales price and fair value price in the form of a 20-25% downpayment. Homebuilders have a better chance of getting homebuyers into a property with a lower downpayment by not passing on that 20-25% requirement to buyers and then strategically defaulting before they have to pay for that business decision with the lenders. And apartment builders only require a small deposit for move-in.
It is strange indeed. I've heard that in Vegas, there are new subdivisions being built next to 'ghost-town' subdivisions. In other words, people who are in a position to buy a new home, don't want an 'old' new home, and builders / bankers are happy to accommodate.
Well, there you go again, Tyler, expecting people to finish what they start;)
Nwe construction has people working, keeps the government numbers looking good and is to be encouraged
Completed construction is bad for the economy and needs to be shuttered away.
Ask China.
Housing starts are stuck in the penalty box, but upticking a bit. COMPLETIONS are FALLING within the penalty box. Not good.
http://confoundedinterest.wordpress.com/2012/02/16/housing-starts-initial-jobless-claims-and-foreclosures/
I dunno. I see this (housing starts above completions) as the beginning of the next boom. All the printing was going to have an effect sooner or later. Get ready for some even bigger roller coaster rides.
I swear to God....this place is just Soooooooo negative.
You guys should come out to my house and enjoy the view of a 100% skylight without that pesky roof in the way. The stars are fabulous at night, and the wonderful, now bankrupt and toally lawsuit proof, builder supplied us with a tarp to sleep under during those unhandy rains.
A housing start is a concrete pad. Who delivers the concrete? da Mob.
In WWII, who ran the NY harbor because they controlled the government? da Mob.
Reuters suggests the Mafia business startup plan is a good one.
Where are the jokes?
Check your history. The Mafia does not, and did not, control government in NYC - during the war, the government and the mob decided to "cooperate" in order to ensure the flow of materiel by the longshoremen thru the port. The Feds also made use of NY mob connections to engage in assistance in Italy against the Axis forces.
Now, if we are talking about ready-mix concrete in NYC today, then, all of the suppliers are "legitimate businessmen." Really. Yeah.
You might want to check insider selling of the homebuilders stocks...maybe this is just a pump and dump...
The veracity of all data is in doubt these days. I have far more questions than I get answers for. For example what exactly constitutes a "housing start"? Most likely it is no more than whatever some regional manager at Lennar pencils in on the form he was provided. "I don't care what number you put in Bob, just make it better than last month!"
I would not be surprised if they are taking advantage of 15 different permanent and 'temporary' government programs/tax incentives that alter behaviors in the housing industry.
Also check this out, hilarious:
http://www.oneaddition.com
Chinese ghost towns bitchez!
It sucks to be stupid! If the economy is suffering from an overhang on housing, how can an increase in housing starts be good news - whether contrived or real? I just don't get it. Further, initial claims are down. My economics brain (again, must be stupid) says that the number of employed is the real factor in the economy, acting as a proxy to the amount of demand for labor and the amount of disposable income available to drive consumption. Yet the market sees a diminished labor force as a sign of a recovery. Keynesian, Austrian, Friedman, or other, this doesn't jive...at least to someone who is stupid.
My favorite, "I must be stupid" is around consumer credit. Consumer credit on the rise as an indicator of a stregthening economy. Um.... OK... so people increasingly can't make their ends meet must go further into debt in order to survive. This is good news. Got it. I must be forking retarded. Credit of any sort as a positive or negative indicator... people upset because "the banks are NOT lending"... we need to get the banks lending again to get the economy rolling. Got it... I'm forking retarded.
My economics brain (again, must be stupid) says that the number of employed is the real factor in the economy, acting as a proxy to the amount of demand for labor and the amount of disposable income available to drive consumption...
Here again, is where where your completely logical and astute observation of the obvious has been hijacked by (s)elected officials and derailed.
What's the definition of "employed"?
Paying a pawn to house sit in an underwater vacant struture to give the appearance of normalcy meets the definition for some.
I'm in the Charlotte NC area. We are looking to relocate closer to our jobs and the market is flooded with shortsales. Almost every house we see is a shortsale. My concern is that our home may sell faster since it's not a short sale and from what we hear, purchasing a short sale can be a messy process. Plus, lots of the comps we are seeing are these shortsale homes.
Not seeing an increase in this area!
I in no way advise you to offer add'l cash under the table to the short seller. Not in the least.
Short sales are a big pain, because it takes months to close. In most markets, the lion's share of offerings are "bank" sales, which are what most short sales morph into, given time. Bank sales are discounted, just like short sales, but they will close in 30 days, and are nearly impossible to compete against.
These daze, you better get Title Insurance to CYA!
Evidence of this statistic is literally in my back yard.
Behind my building was once a golf course. Seven years ago it was sold to a developer who was going to build Luxury homes and townhouses. They put up a sign for "pre construction sales". They build a model. A few months later, the model home came down, as did the sign. This was followed by a new model home, a new developer and a new "pre construction sales" sign. And then the cycle repeated itself. It has now been seven years and three developers later. Last week...the most recent "pre construction sale" sign went down. For the record, the original Developer was Lennar, the second had the name "Donald Trump" somehow affiliated (god knows how). Now I don't even bother to read the signs. I just laugh whenever I see a new one.
On the bright side...an abandoned golf course is a wonderful place to bike ride or jog in...so at least I've got that at my doorstep.
job in ????.......get a blow job in ????
EDIT oh sorry, jog in....yes jogging is nice too
Damn, I was just going through the #'s and tring to figure out the skew. Thanks for the clarification. The hopium is flowing today. Helo Ben is on the podium, so I'm not surprised.
maybe the workers are just working very very very slowly so they still have a paycheck
At least China finishes the cities they start
Builders often start a house with little or no intention of finishing it in a set time frame-think cash flow. House number two is started to pay for house no.1 that has been robbed of any or all money to finish it.Then house 3 is started just to keep the same scheme going- works till it don't.
Construction loans are one of the oldest and easiest embezzling methods around. A builder, in desperation, will get the developer to subordinate a lot to him. So said builder goes to the bank with lot as down payment and receives construction loan. He builds home and doesn't pay subs and suppliers....eventually walking away with a couple hundred thousand. Yes, theoretically, he could be criminally prosecuted, but usually not.
If you look at the end of '05 on the chart, the starts lead when the market reverses trend. From my corner of the world where I sell cabinets for new housing in the DC market, things have picked up!
I bought a foreclosure in America 2010. The banks got another sweetheart bailout with the foreclosure deal, so nothing to do but pick your spot and BTFD.
I am down in Costa Rica and Nicaragua now. There is also a long trail of tears and broken dreams here, too, marked by empty developments and empty condos that are half built or just failed to sell shortly after 2008. Most are now just little ghost towns waiting to surrender to the elements. But before anyone thinks about rushing down here, there are absent infrastructure problems (water and electric) and American real estate is still way cheaper in most places. Things were getting way overpriced here and still have not yet adjusted.
I recall visiting CR maybe 8 years ago and driving passed Quepos and seeing all these "Coldwell Banker" signs on oceanfront / cliffside lots along a freshly paved road. There were no electric poles nor any evidence of water/sewage utilities and besides the sunny view, I couldn't imagine the angle that one would sell me on.
I often wonder... If (from my vantage point, when) the proverbial Shit Hits the Fan... how will places like CR view ex-pats. My spidey senses tell me maybe not so well.
If there's enough ex-pats, the natives get pushed into the Caribbean...
if a fema family fun center contains 500 units, right there you have 500 housing starts!
How does this tie in with the story of the guy that furnished his whole apartment with
furniture made from free Fedex boxes?
Actually, this gives me an idea.
Corrugated cardboard is a surprisingly strong building material; be sure to waterproof it with lacquer/polyurethane...
Channel stuffing numbers!
Wait until the 6 million new foreclosures hit this year after the recent "settlement", then talk to me about new housing starts...
I propose a new standard of housing activity: "Lost in Destruction."
This will account for the thousands of housing units abandoned and torn down in Detroit, Ohio, Illinois, Indiana, etc.
I quit bidding on new single family units, simply because the permit approval process was getting exponentially longer and more difficult to obtain a building permit. How can one bid on a job where the time involved to completion follows an unknown, exponential variable? And just wait until they get mandatory green intiatives into local building codes, what was once remotely possible becomes simply impossible and I have no idea how architects estimate material costs in this market.
Just deficit spend I suppose for compounding mal-investments, our entire eCONomy is one huge mal-investment.
Starts include the relatively "on fire" multifamily (apartment) units and I suspect the measurement of their completion is off since the units are not "sold" like new homes.
Oh my! Nothing a bunch of B-1 visas couldn't solve. You can't export the construction, like other industries, Apple, cough, cough, so import the cheap $0.15/hr labor. You know, import the cheap labor, house them in shotgun shacks, beat the shit out of them physically and mentally, profit from their labor, then turn them into everybody elses problem. Any of this sounding familiar? Like maybe it has been done before? Think early American history, in the South, cotton industry. Nope, nothing? After you've blown your money on immoral behavior, go on TV and point out what a social delema the illegal aliens are. Aw man this gets good. Yeah, that's the ticket. Holly mother of spaghetti monsters, there's a good idea. You can even start a web site and claim, using specious logic, how you knew the social problems were coming but no one would listen to you.
Excellent data that should be formally analyzed by statistical analysis, using lead-lag and regression analysis.
Looking quickly at the data, I see that from Jan. 2000 to Jan. 2006, the red curve (starts) are generally higher than the blue curve (completions). The black bars are usually above the baseline. This is most likely due to the market growth, and the long tail of the distribution as to when the particular house finally gets finished.
In Jan. 2006, there is a sea change. Market suddenly retreats, and the red-blue curves switch position. The black bars are usually below the baseline, as the market contracts. The average gap between the red-blue curves is greater after than before this watershed moment, most likely meaning the predictability in when a house finishes becomes less (ie. the long tail of the distribution got significantly longer).
In April 2011, we seem to have another inflection point; the red curve is again above the blue, and the black bars are consistently above the baseline. It appears the building industry has decided to re-start their previous voyage (similar to Jan. 2000 data). Is this wishful thinking on their part? maybe. Maybe its their last hope. Maybe the'd be dead anyway if they continue to be patient & wait, so they might as well go for it, trying to convince prospective customers that the bottom has been reached.
Of course, just because a bunch of builders decide to give it a go, doesn't mean we're at the bottom. The bottom isn't decided by the builders. The bottom is decided by those who will live in those home (and the housing stock in general) and those who enable those homeowners (ie. all other buyers in aggregate, banks, MBS, Fanny, Freddy, etc.).
Time will tell.
My personal crystal ball tells me we are a long, long way from hitting bottom. When Canadian real estate has hit bottom, US housing market will already be on its way back up. Until Canada crashes, the US housing market hasn't finished crashing yet. This is based on the hot money from China that is still pouring out from there into the Vancouver Canada real estate market. Once China crashes, Vancouver will get white hot, far hotter than it is today. Shortly after that occurs, everybody who needed to get out of China with their lives, family, and their money will have escaped. That is when Vancouver will crash. That sonic boom of a crash wave will travel across Canada from West Coast to East Coast. When it is complete and echoed a few times, we're at the bottom, and things everywhere can start back up.
Excellent data that should be formally analyzed by statistical analysis, using lead-lag and regression analysis.
Looking quickly at the data, I see that from Jan. 2000 to Jan. 2006, the red curve (starts) are generally higher than the blue curve (completions). The black bars are usually above the baseline. This is most likely due to the market growth, and the long tail of the distribution as to when the particular house finally gets finished.
In Jan. 2006, there is a sea change. Market suddenly retreats, and the red-blue curves switch position. The black bars are usually below the baseline, as the market contracts. The average gap between the red-blue curves is greater after than before this watershed moment, most likely meaning the predictability in when a house finishes becomes less (ie. the long tail of the distribution got significantly longer).
In April 2011, we seem to have another inflection point; the red curve is again above the blue, and the black bars are consistently above the baseline. It appears the building industry has decided to re-start their previous voyage (similar to Jan. 2000 data). Is this wishful thinking on their part? maybe. Maybe its their last hope. Maybe the'd be dead anyway if they continue to be patient & wait, so they might as well go for it, trying to convince prospective customers that the bottom has been reached.
Of course, just because a bunch of builders decide to give it a go, doesn't mean we're at the bottom. The bottom isn't decided by the builders. The bottom is decided by those who will live in those home (and the housing stock in general) and those who enable those homeowners (ie. all other buyers in aggregate, banks, MBS, Fanny, Freddy, etc.).
Time will tell.
My personal crystal ball tells me we are a long, long way from hitting bottom. When Canadian real estate has hit bottom, US housing market will already be on its way back up. Until Canada crashes, the US housing market hasn't finished crashing yet. This is based on the hot money from China that is still pouring out from there into the Vancouver Canada real estate market. Once China crashes, Vancouver will get white hot, far hotter than it is today. Shortly after that occurs, everybody who needed to get out of China with their lives, family, and their money will have escaped. That is when Vancouver will crash. That sonic boom of a crash wave will travel across Canada from West Coast to East Coast. When it is complete and echoed a few times, we're at the bottom, and things everywhere can start back up.
Dead cat bounce in housing soon to be over.
Good thing consumers are confident though. However, I have yet to talk to one person who feels "confident." Where do they tak ethese polls?
I'm confident that $16+Trillion in debt is NOT a good thing!
When houses were flying off the shelf, contractors probably started painting the walls before the drywall was dry. Now they probably wait a few days. I heard once that back in the old days when they built a house with a basement they stacked the lumber for the house on top of the basement and left is sit for a year to be sure there would be no settling problems.
Erm, houses take a while to finish, so completions should lag starts. Looking at the chart, the historical lag seems to be about 1 year. But likely homebuilders are in no great hurry to complete - why rush in a weak market - so a longer completion lag's likely now. Given the timing of the pickup in starts, it looks like there could be a few months before a pickup in completions will be due. If it doesn't materialise by June or so, *that* would be worrying.
Re tape painting, it's worth bearing in mind the housing market it regional. Likely the pickup in starts is originating form the healthier areas, while the completion delays are biased towards the worse areas, where the homebuilders have least incentive to hurry things up...